Establishment of Special Integrated Logistics Zones in the Kingdom of Saudi Arabia

By virtue of Royal Decree No. A/17 dated 01/02/1440H (corresponding to 10/10/2018G), the Government of the Kingdom of Saudi Arabia (“KSA”) set the regulatory framework for the establishment of Special Integrated Logistics Zones (“SILZ(s)”), in KSA – in addition to regulating businesses established and operating in SILZ(s). The first SIZL, in KSA, has been established in the King Khalid International Airport.

In a more recent development, on 31^st October 2022, the Minister of Transport, formally, announced the opening of SILZ(s); and that investors are welcomed to establish and operate their businesses in SILZ(s), since their implementation has, now, been materialized.

The aforementioned development forms part of an initiative by the Government of KSA to help shape KSA into an attractive investment hub, for foreign investors and businesses, in the logistics field – by providing significant tax and employment incentives. SILZ(s) will, predominantly, target businesses who are conducting any of the following activities:

• Maintaining, repairing, processing, modifying, developing, assembling, and sorting goods;
• Sorting, packing, repacking, trading, distributing, handling, and using in any form goods, including simple manufacturing processes;
• Importing, exporting, and re-exporting goods;
• Value-added services, logistics services, and after-sales services; and
• Recycling waste and electronic waste.

The General Authority of Civil Aviation (“GACA”) has been entrusted with the responsibility of regulating SILZ(s), in addition to issuing all relevant regulations and incentives concerning businesses operating in these zones (in cooperation with other regulators and authorities). GACA has, without limitation, issued relevant investment regulations, which regulate the qualification requirements that businesses need to comply with – for the purpose of operating in SILZ(s). The qualification requirements differ, depending on which of the following categories the investor falls into:

• Sector Leaders Category;
• Logistics Providers Category; and
• Regional Distributors Category.

Finally, it is worth mentioning that companies incorporated within a SILZ are exempted, during the first five (5) years of their incorporation, from the standard Saudisation requirements that would, otherwise, apply to a Saudi Arabian company incorporated in the mainland. Furthermore, following the first five (5) years of incorporation, the relevant companies will be subject to more lenient Saudisation requirements than those applying on companies located in the mainland.

How can we help?

We can assist and advise foreign investors with respect to GACA’s requirements for establishing a business in SILZ(s) – as well as advising, more comprehensively, on the associated incentives that such investors would enjoy. Please feel free to contact us if you require any further clarification or assistance, in this regard.